Contract Law: A

Beginning
 Part II Objectives
1. Recognize the requirements of a valid
contract.
2. Classify contracts as valid, void,
voidable, or unenforceable.
3. Explain the requirements of a valid offer
and acceptance, the first important
elements in a binding contract.
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 Part II Objectives
4. Summarize the various forms of
consideration, when consideration is
necessary to form a binding contract, and the
exceptions to the rule requiring the presence
of consideration in a contract.

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 Part II Objectives
5. Determine what makes parties competent to
contract and the effects of various
incapacities.
6. Distinguish between a legal and an illegal
agreement and the consequences of entering
into an illegal agreement.

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 Part II Objectives
8. Point out the circumstances in which
parties to a contract may transfer their
rights and obligations after the contract
has been made.
9. Summarize ways in which contracts may
be ended and the various remedies
available to the parties for breach of the
contract.
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 Part II Objectives
10. Be able to apply the online rules that have
evolved from traditional contract situations.

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 What a Contract Is
• Contract: legally binding agreement between
two or more competent persons.

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 Elements of a Valid Contract
• Agreement, that
is, Offer plus
Acceptance
• Consideration
• Capacity
• Legality

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 Agreement
• The agreement starts with an offer
• One person has something
• Another wants it
• The one who wants the thing makes an offer
• The one who has it either accepts the offer, or
does something else, like haggling (making a
counter-offer)
• They go back and forth until such time as the
agreement is formed
 Consideration
• This is the thing that a party wants
• It can be chocolate
• It can be peanut butter
• It can be money
• Chances are, if you have it, somebody wants
it, and they may be willing to part with
something they have to trade.
 Capacity of parties
• Not everybody has the capacity to enter into a
contract
• If you take advantage of somebody and make
a contract, shame on you.
• And besides, if you get sued, you might get
your contract thrown out, lose your
consideration, and maybe you will be cast into
outer darkness.
 Legality
• Legality: the point that a contract must not be
against the law.
• This point seems to make more sense than the
others, but, as we know people make illegal
transactions every day (like drug deals.) But it
is pretty likely that a person who has lost on a
bad drug deal isn’t going to take the matter to
court, anyway.

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 Breach
• Breach: failure to perform the obligations
required by a contract.

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 Contract Terminology
• All contracts may be classified in the following
ways:
1. Bilateral or unilateral.
2. Valid.
3. Void, voidable, or unenforceable.
4. Formal or informal.
5. Express or implied.
6. Executory or executed.

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Bilateral and Unilateral Formation

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 Bilateral Contract
• Bilateral contract: contract in which one party
makes a promise in return for a promise made
by another party.
• Most common type of contract.

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 Unilateral Contract
• Unilateral contract: contract in which one
party makes a promise in return for the
performance of an act by another party.

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 Valid and Void Contracts
• Contracts may be classified in terms of their
enforceability.
1. Valid contract: contract containing all
the essential elements.
2. Void contract: contract that has no
legal effect and cannot be enforced.

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 Voidable Contracts
• Voidable contract: contract enforceable
against all parties until the party legally
entitled to avoid the contract decides to do so.

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 Unenforceable Contract
• Unenforceable contract: contract that is legal
but fails to meet some requirement of the law.

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 Formal and Informal Contracts
• Formal contract: written contract prepared
with certain formalities, including a seal.
• Informal contract: contract prepared without
formalities.

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 Informal Contract
• Informal
Written
Contract:

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 Express and Implied Contracts
• Express contract: contract in which the
agreement is specifically stated.
• Implied contract: contract formed from
actions of the parties.
• In some instances, a contract may be partially
express and partially implied.

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 Quasi Contract
• Quasi contract: contract implied in law to
prevent one from benefiting at another’s
expense.
• In certain cases, the courts create a fictional
contract, called a quasi contract, despite the
wishes and intentions of the parties so as to
promote justice.

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 Executory and Executed Contracts
• Executory contracts: contract that has not
been fully performed by one or all parties.
• Executed contracts: contract that has been
completely carried out.

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 Contracts Governed by
Precedent or Statute
• Precedents vary from state to state.
• Some areas of contract law are governed by
modern statutes that uniformly apply in all
states.
• Common law will continue to govern those
contracts that have not been modified or
replaced by statutory law such as the UCC.

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